The Central Bank of Egypt (CBE) revealed that the annual core inflation rate dropped to 4.9% in August, down from 5.9% in July. This level of inflation is the lowest in more than six years.

The CBE said in a statement on Wednesday that the core consumer price index(CPI) it issues, recorded a negative monthly rate of 0.4% in August, compared to a positive rate of 0.1% at the end of July.

The headline CPI, announced by the Central Agency for Public Mobilization and Statistics (CAPMAS), recorded a monthly average of 0.7% in August, compared to 1.8% in July and 1.8% in August 2018.

The CBE added that the annual rate of headline urban inflation was 7.5% in August, compared to 8.7% in 2019.

Radwa El-Swaify, head of research at Pharos Holding, said that inflation scored its lowest in six years, reaching 0.7% on a monthly basis and 6.7% on an annual basis in August, which is lower than her expectations of 1.5% on a monthly basis.

Urban inflation rose slightly to 0.7% per month and 7.5% per annually, below expectations of 1.6% per month and 8.5% per annually.

Slowing inflation to single digits for three consecutive months supports the possibility of a rate cut at the 26 September CBE’s Monetary Policy Committee (MPC) meeting at a rate of 1 to 1.5%, El-Swaify said.

Agreeing with El-Swaify, Ahmed Shams El Din, head of Research at EFG Hermes, stated that as the inflation scored its lowest in six years, hence he expects a rate cut at the next MPC meeting that will be held on 26 September at a rate of 1.5% to 2%.

The CAPMAS said that the general CPI totalled 314.8 points for August 2019, an increase of 0.7% from July 2019.

The increase in the prices of vegetables, dairy, cheese, and eggs was by 1.9%, health care by 1.8%, transport and communications by 0.4%, and miscellaneous goods and services by 0.9%. In contrast, the prices of meat and poultry fell by 2.6%.
Additional reporting by Nehal Samir